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Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to http://pennystockpaycheck.com for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

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Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

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Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

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Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

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UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

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Gold price slumps as traders face global metals market freefall

Category : Business

The decade-long bull market in the precious metal is over, after hectic selling drags down silver and copper

The biggest plunge in the gold price for more than 30 years has wiped $1 trillion off the value of global reserves of the precious metal, leaving small investors reeling as popular funds have lost a fifth of their value in just a matter of weeks.

In hectic selling that began last Friday, the price has dropped from $1,580 an ounce to $1,380, dragging other metals down. Silver has sunk from $28 to $23, while copper is down from $7,500 to $7,100 a tonne.

Small investors in widely-held funds such as BlackRock Gold & General have suffered. The BlackRock fund, which has £1.6bn under management, has lost 21% of its value over the past month and 36% over the past six months. It invests in the shares of gold and metal mining companies – and these have fared even worse than the gold price.

Barrick Gold, the world’s biggest gold miner, has seen its shares slump on the Toronto stock market from C$55 to just C$19 since last September. Newcrest Mining, an Australian gold miner that is the biggest holding in the BlackRock fund, has fallen from A$30 last September to A$17 this week.

But Richard Davis, managing director of BlackRock’s Natural Resources team, says the fall has to be seen in the context of the long rise in the gold price, which rose 405% between January 2000 and January 2011.

“We don’t see this sell-off as the beginning of a bear market for the metal,” he added. “Longer term, the factors that have driven the bull market in gold have not gone away. We are yet to see the real ramifications of quantitative easing, in terms of inflation.

“At the same time, we expect jewellery demand to pick up at these lower prices, especially in China. The recent sell-off has been largely indiscriminate, which has presented us with some excellent buying opportunities for the longer term. We have been adding to several positions in the Gold & General Fund.”

But it might be expected for a fund manager to talk up his fund. Another gold market expert, who preferred to remain anonymous, said: “For a long time the gold price was outperforming the price of shares in gold mining companies, and fund managers were saying the two had to converge. But it just hasn’t happened. Very few of them pay a dividend, the costs of extraction have risen sharply, and they are leveraged to the gold price on the way down.”

But why has the gold price fallen so far and so suddenly? Some say it was prompted by investment bank Goldman Sachs, which, last Friday, recommended its clients go “short” on gold, slashing its longer-term forecast for the price of gold to $1,270 by end 2014 – a target it has nearly hit already. It marks a U-turn from the end of 2011, when Goldman Sachs was telling investors that gold would hit $2,000 an ounce.

More bearish commentators, such as Viktor Nossek, head of research at exchange traded fund provider Boost, wrote before the recent price crash that gold was heading into a two-decade long bear market. “We are possibly entering a stage of prolonged weakness in the price of gold,” he says.

Some predict that gold is heading back below $1,000 an ounce, and point to charts that suggest similarities with the last crash, between 1980 and 1983, when it fell in price by half and stayed low for another decade. But others suggest darkly that the market has been temporarily rigged by short-sellers.

Direct selling of gold by British investors has been relatively muted, says Adrian Ash of Bullion Vault, which stores 33m tonnes of gold worth more than £1bn on behalf of 45,000 investors. He says sellers have dumped only 1% of their holdings and that customers turned net buyers by Wednesday this week.

He blames a range of factors for the sell-off, including the US Federal Reserve’s indication that it is less inclined to print more money; news that Cyprus may sell its reserves, possibly followed by other European governments; and a slowdown in Chinese growth. However, he believes fundamentals, remain supportive: “While we don’t see the price suddenly going back up, neither do we see it in the long term falling substantially from the current level.”

The good news for the vast majority of people whose only connection with gold is their teeth or their wedding ring, is that the sell-off in commodities has been across the board. The price of oil has also fallen, from $110 a barrel at the beginning of April to $99 this week, finally giving some relief to motorists, with all the major supermarket chains cutting pump prices by 2p-3p a litre.

Cast a wide net when investigating bankers

Category : Business

While the action of the parliamentary commission on banking standards, in naming “the architects of a strategy” which led to HBOS having to be bailed out by the taxpayer, is laudable, its work, surely, has just started (Former HBOS chief asks to have his knighthood revoked, 10 April). Do not the bankers responsible for the morally “toxic” decisions that led to Libor-rate fixing also need to be, not only named and shamed, but banned from any further involvement in financial activities in the City?

The same applies to those responsible for the laundering of Mexican drug money; it cannot be sufficient to castigate only the bankers who cost the nation money, as the net must be cast much wider if there are to be any changes to the banking culture as we know it. The banking industry’s attempts at self-regulation, epitomised by Barclays’ “transform” programme, was revealed to be a sham almost immediately by the ridiculous bonus paid to Rich Ricci. If ever there was a time for Labour to open a debate on the creation of a people’s bank it must be now, especially as RBS seems ripe for nationalisation and the ring-fencing of “socially useless” banking is not due until 2019. As for knighthoods and other honours, all should be removed from anyone in the City guilty of condoning unethical financial transactions, and that includes advising on, and participating in, tax avoidance.
Bernie Evans
Liverpool

• How refreshing that the role played by former head of accountants at KPMG, the auditor for HBOS, is coming under scrutiny. Accountants are rarely called to account in the many cases where a half-awake person of integrity would have known about and refused to sign off the published company accounts. The accountants at News International, for example, were apparently unaware of countless illegal payments made to police and others in the long-running phone-hacking scandal.
Eddie Dougall
Bury St Edmunds, Suffolk

KPMG partner’s stock tips earned golf buddy $1m

Category : Business

Former senior partner Scott London charged by US authorities with insider dealing

US authorities have charged a former KPMG partner with insider dealing after he admitted giving his golfing buddy share tips in exchange for cash, jewellery and $25,000 worth of concert tickets.

Scott London, a senior KPMG partner in southern California, was charged with conspiracy to commit fraud and for leaking non-public information about companies he audited, including diet supplement firm Herbalife and shoe company Skechers.

The complaint filed by the securities and exchange commission (SEC) said London’s stock tip leaks had made his golf partner Bryan Shaw, a Californian jeweller, more than $1m (£650,000).

In exchange for the tips, Shaw gave London roughly 10% of the profits he made in the form of bags stuffed with up to $50,000 cash in $100 bills, a $12,000 Rolex watch, other jewellery and concert tickets, according to the filing.

One of London’s tips was that Herbalife was about to become a private company. “That is going to be where you make a ton of money,” London said, according to the criminal filing, “Because, you know, we’ll know that.”

US attorney André Birotte said London “chose to betray the trust placed in him as a financial auditor and to tip the trading scales for the benefit of insiders like himself”.

“The public has every right to fully expect a level playing field in our financial markets” he added.

London, who was fired by KPMG immediately when it discovered he had passed on the information, said the tips began in 2010 in casual conversations with “someone I’d known from the golf club”.

In an interview with the Wall Street Journal he said he didn’t realise Shaw was trading on the information he was leaking. “Once he told me he had traded, that’s when my heart sank,” London said. “We had discussions, this wasn’t right – I knew it was wrong – but it just happened.”

However, London admitted he continued to provide Shaw with information about Herbalife, Skechers and Deckers Outdoors.

In a statement London said: “I regret my actions in leaking non-public data to a third party regarding the clients I served for KPMG. Most importantly, and I cannot emphasise this enough, is that KPMG had nothing to do with what I did.”

KPMG has resigned as the auditor for Herbalife and Skechers after warning “that the firm’s independence has been impacted”.

London’s lawyer Harland Braun has admitted that his client knew he was breaking the law. “But he just can’t understand why he did it, and it’s hard to understand why he did it,” Braun told business news channel CNBC on Wednesday.

“It makes no sense. He’s looking back on the years that he did it. It made no sense from a dollar-and-cents point of view; it made no sense in terms of his ethics. He’s not trying to justify it in the slightest.”

Braun said London’s prospects were “pretty grim”. “His life is ruined. He’s 50 years old, he’s lost his career, he’ll probably lose his licence, he’s been disgraced, and he may have to do some jail time. That’s the best case scenario. It’s a very grim reminder of the consequences for anyone who wants to leak any insider information.”

London was due to appear in a federal court in Los Angeles late on Thursday. Shaw has also been charged.

Shaw has admitted he “profited substantially from stock trades” on a number of companies on which London provided “non-public information”.

He said he had been incredibly stupid, and was co-operating with the FBI, SEC and US Department of Justice.

“I expect that my actions will result in significant civil and criminal consequences, but I realise that this is the painful price I will pay for my transgressions,” he said in a statement before the charges were filed.

When Shaw’s brokerage firm, Fidelity, noticed his unusual trading patterns, it cut him off and Shaw and London agreed to end their arrangement. But when US authorities later approached Shaw about his trading, he agreed to cooperate, restarted his tip-sharing relationship with London and recorded him passing on information in a branch of Starbucks.

In praise of … Paul Moore

Category : Business

Among the many dishonoured bankers of HBOS, here’s one who deserves some praise

Among the many dishonoured bankers of HBOS, here’s one who deserves some praise. Had it not been for whistleblower Paul Moore, James Crosby would probably still have his knighthood and the surrendered third of his pension; and he almost certainly would not have stepped down in 2009 as deputy head of the Financial Services Authority. Mr Moore was head of risk at HBOS between 2002 and 2004, during which time his queries about sales practices earned him expletive-laden threats. Shortly after warning senior directors that the bank was lending a dangerous amount, he was dismissed by Mr Crosby. When HBOS collapsed, he testified to the Treasury select committee and then to the parliamentary commission on banking. On both occasions, his evidence was key. Had there been more alarm-raisers like Mr Moore, and more senior managers willing to listen, HBOS might still be with us, and billions might have been saved.

The Herbalife saga is practically a made-for-Hollywood script | Heidi Moore

Category : Business

Herbalife is a diet company that excels at drama. It has Wall Street titans sparring, KPMG resigning and investors confused

There is something about diet company Herbalife that makes very rich men act very strangely. The weight-loss company should be relatively unremarkable. Instead it’s been in the center of a dramatic story that should have Hollywood calling.

It has everything – intense, dashing hedge-fund titans embroiled in a public war, allegations of pyramid schemes, billions of dollars riding on on the outcome and now, as of today, a rogue auditor who risked his entire career by allegedly squirreling away inside information to make himself a profit. The Herbalife scandal even features Carl Icahn, one of the 1980s corporate raiders who reportedly inspired the timeless capitalist character of Gordon Gekko. If Wall Street wars got Oscars, Herbalife would be a top contender.

With so much heady money and power surrounding Herbalife, it’s no surprise that the wafting scent of greed would envelop one of the people whose virtue should have been above reproach: the company’s auditor, the prestigious accounting firm KPMG.

Auditors are not glamorous people. If investment bankers are the popular, fratty jocks of the financial world, and traders are the kids who love to hang out with their Camaros, auditors are more like the bespectacled stars of the math team. They are accountants – precise and cautious by nature – and, as a result, they have all the usual attendant social insecurities that nerds do: they’re so happy just to be invited to the party that they may not judge too carefully the underage drinking and drugs that are going on. When auditors get into trouble – as they did with companies like Enron and WorldCom – it’s usually because they were too eager to please their clients that they kept quiet when they saw something wrong. They didn’t want to lose their place at the party.

So the “rogue auditor” is a rare character to cast. Auditors are often guilty of neglect, or looking the other way; rarely do they do something really bold and reckless like trade on inside information. Yet, apparently prompted by the drama around Herbalife, this is what a partner with the company’s auditor, KPMG, did, according to Herbalife.

KPMG fired the rogue auditor on 5 April and told Herbalife about the whole debacle yesterday. This morning, Herbalife’s stock was halted for an unusually long time – two hours – as the company tried to decide how to tell investors.

During that time, traders and journalists took to Twitter to speculate on what could possibly be so horrible that it would require the company to completely stop trading its stock for most of the morning.

The answer, it turns out, was pretty bad.

The partner at KPMG was entrusted with combing Herbalife’s financial statements for errors. Unfortunately, according to Herbalife’s version of the story, he also shared the company’s confidential information with someone else, presumably so they could make a profit of their own. That would give him an incentive to mess with the company’s results to help his own financial interests. As a result, KPMG’s entire opinion on the company is reduced to worthless chaos; the auditor said it had to withdraw its reports on Herbalife for the last three fiscal years.

Herbalife, already embroiled in months of wars between its investors, hastened to assure everyone that the company was still sound. It stressed that KPMG had resigned as its auditor purely because of the possible insider trading and “not for any reason related to Herbalife’s financial statements, its accounting practices, the integrity of Herbalife’s management or for any other reason”.

Herbalife managed to contain the damage: by halting the stock for two hours, it had raised expectations that the news would be far worse. The stock fell only 1% on the news when it finally came out. However, there was still evidence of chaos. In the same statement, Herbalife said that KPMG had said the three years of financial statements could both be “continued to be relied upon” and “should no longer be relied upon”.

So that clears things up.

This only adds another twist for the Herbalife saga that’s been playing out on the larger Wall Street stage. It was only three months ago that the distinguished Carl Icahn was publicly trading insults on television with Bill Ackman, the silver-haired, baby-faced boy wonder of investing. Ackman has argued that Herbalife is a pyramid scheme and has bet against the company; Icahn took the other side of the bet. Daniel Loeb, who was previously a friend of Ackman’s, shocked the investing world by switching allegiances and taking Icahn’s side.

There’s a lot more information that has yet to come out about the problem with KPMG and Herbalife. That’s good if you’re in Hollywood. It means there’s enough time to run through the casting. What do you think of Alan Alda, Elliott Gould, or Frank Langella to play Carl Icahn? John Slattery to play Bill Ackman? Michael Sheen as Dan Loeb? Philip Seymour Hoffman as the rogue auditor?

Now who’s going to call John Grisham and tell him about all this?

Slovenia’s prime minister tries to quell eurozone bailout rumours

Category : Business

Bratusek insists government committed to fixing country’s banks, struggling with bad debts as double-dip recession continues

Slovenia’s prime minister has attempted to quash speculation that she will become the next eurozone leader to seek a bailout, after an influential report warned that the country faces the threat of a “severe banking crisis”.

On an official trip to Brussels on Tuesday, Alenka Bratusek insisted that her government was committed to fixing Slovenia’s banks, which are struggling with bad debts as a double-dip recession continues.

Bratusek admitted that Slovenia did not face an easy task, but denied that it would be forced to seek international help.

“The new government is determined to do everything in its power to solve its problems by itself,” she told a press conference, after holding talks with European Commission president José Manuel Barroso. “We are aware that the banking sector is the number one problem in

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Portugal’s prime minister plans more cuts to health and education spending

Category : Business

Pedro Passos Coelho chooses not to raise taxes again in order to meet stringent targets set by international lenders

Portugal’s prime minister has announced plans for further cuts to health and education spending rather than raising taxes again, in order to meet tough targets set by international lenders after the constitutional court threw out budget measures on Friday.

“I shall instruct ministries to implement necessary reductions in functional spending to offset what the court ruling prohibited. It will certainly be a very difficult process,” Pedro Passos Coelho said in a live broadcast on Sunday evening.. He added that while he respected the court, its ruling would hamper government plans to take back control of its own finances from international lenders next year.

The speech followed an emergency cabinet session on Saturday and a meeting between Passos Coelho and President Aníbal Cavaco Silva, who has the power to dissolve parliament but urged the government to complete a four-year mandate it won at the polls in June 2011.

On Friday the court found that proposed cuts in holiday bonuses for civil servants and pensioners were unconstitutional, as were reductions in sick pay and unemployment benefit, all of which would have trimmed €1.3bn from budget spending for this year, according to media estimates. The court, however, upheld other planned measures such as tax hikes.

Passos Coelho’s conservative Social Democrats took power after his Socialist predecessor asked a “troika” of lenders for a bailout in March 2011, before resigning. Since then, the government has imposed stringent and unpopular spending cuts totalling €13bn – about 8% of Portugal’s economic output – which have led to widespread protests in common with other eurozone countries suffering from a persistent economic slump.

The government failed to meet its budget deficit targets last year set by the European Union, the International Monetary Fund and the European Central Bank, and in order to fulfil the terms of its €78bn bailout Lisbon has pledged to trim a budget shortfall of 6.4% of gross domestic product in 2012 to 5.5% this year.

Passos Coelho survived his fourth vote of no confidence last Wednesday but faced renewed calls to resign over the weekend. Opposition Socialist leader António José Seguro accused the government of breaking campaign promises and said dole queues of almost a million people showed austerity had merely locked the country into a recessionary spiral, which might yet lead to a second bailout. Portugal’s economy shrank by 3.2% last year.

“The country needs a different exit strategy from the crisis, one that prioritises economic growth,” Seguro told state television. “The country is living in a social tragedy. This needs to change, and that change entails substituting the government.”

In crisis-hit neighbouring Spain, meanwhile, the CSI-F union for civil servants said the government in Madrid should “take note” of the Portuguese court’s decision and reimburse workers with a Christmas bonus axed last December in cuts which likewise aim to trim a yawning budget gap.

Barclays and HBOS: two banks, two different fates

Category : Business

Separate reports into the crises at two of Britain’s largest lenders revealed a common cause of their problems, but widely varying careers in the aftermath of the crash

In the early hours of 15 September 2008, as the US bank Lehman Brothers was collapsing, many feared the worst, and they were proved correct: markets crumbled and, in the coming days and weeks, so did some 30 banks around the world. But few would have guessed that, five years on, the fallout from that crisis would still be front-page news.

Last week, two reports into two banks that fared very differently after the crisis – Barclays and HBOS – were published, shedding light once more on a furious fight for survival in the dark days of 2008. Barclays succeeded and HBOS failed spectacularly.

What both banks had in common was that their problems were rooted in the phenomenal race for growth during the go-go years of the early 2000s. The traditional caution of bankers was thrown aside and a dash for expansion, fuelled by lending and financial engineering, took hold. Barclays moved into tax avoidance – its structured capital markets division generated more than £1bn in revenue in the four years to 2010 – and failed to stop its traders rigging the Libor interest rate, which eventually resulted in a £290m fine.

The two reports could not be more different. The 244 pages detailing the cultural crisis inside Barclays were commissioned by the bank itself, as a demonstration of its determination to clean up its act. It employed a lawyer – City grandee Anthony Salz, a director of the Scott Trust, which owns the Observer – to investigate how and why standards had hit rock bottom. Salz interviewed 600 individuals in nine months, although none is quoted even anonymously in the analysis.

On its way to making 34 recommendations, the report concludes that the bank overpaid its staff, chased an ambition to become a top five player at all cost and failed to make its 140,000 staff understand they worked for the same organisation. Barclays’ new chairman, Sir David Walker, who is writing a cheque for £17m to cover the costs of the review, described its contents as “uncomfortable reading at times”.

In contrast, the 96 pages on HBOS produced by the parliamentary commission on banking standards, whose members include MPs and peers and the new archbishop of Canterbury, was an excoriating attack on the incompetence of the three men at the bank’s helm. It pulled no punches and called for City regulators to conduct an investigation into whether the three – long-standing chairman Lord Stevenson, and chief executives Sir James Crosby and Andy Hornby – should be banned from the City for life. None has commented on the scathing attack on their “toxic” mistakes. Just how much the HBOS report has cost the taxpayer is unclear, but it will be a fraction of the Barclays bill.

HBOS did not survive the Lehman fallout: within three days it had been rescued by Lloyds TSB. A month later, it was bailed out with £20bn of taxpayers’ cash. Barclays did scrape through, but only by going cap in hand to Middle Eastern investors; the circumstances of that venture are now being investigated by the Serious Fraud Office. Salz describes this desperate battle to avoid a bailout as making Barclays look “too clever by half”, damaging its relationship with overstretched regulators and its own investors.

While HBOS was being rescued, Barclays was still chasing growth, snapping up the Wall Street operations of the collapsed Lehman Brothers – a move that Salz said added to the management challenges facing a bank that was already stretched.

Stories had circulated for years about splits inside Barclays. The high street tellers felt no link to Bob Diamond’s casino operations, which the report said had a win-at-all-costs attitude that came to dominate the organisation. Diamond’s chief operating officer, Paul Idzik, was infamous for his behaviour, which included cutting off people’s ties and snapping pens that did not bear the company logo.

But the Salz report shows the retail bank was not blameless either. Salz details a culture of fear that pervaded the division when it was run by the Dutchman Frits Seegers, who left suddenly in 2009. Sales targets were tough, and staff incentivised to push loans with profitable payment protection insurance (PPI) attached.

Diamond and Seegers were put in charge of the two big businesses inside Barclays by the then chief executive John Varley, who failed to prevent them running the two divisions as separate silos. Salz said that while this was not Varley’s intention, he had failed to create a “cohesive” top team.

Barclays’s new boss, Antony Jenkins, who is trying to reinvent the bank, is not entirely spared criticism either. It is not levelled directly at him, but Jenkins ran the Barclaycard operation that sold millions of pounds of useless PPI to cardholders.

At HBOS, there was no hope of surviving the Lehman fallout. In fact, the parliamentary report makes it clear that it would have gone bust even if there had been no financial crisis because of the £47bn of losses racked up in just three of its divisions.

Only one person – Peter Cummings, who ran the HBOS corporate lending arm – has so far faced any official sanction. At Barclays, the SFO continues to investigate former and current executives. But at HBOS, the chances of action seem slim. Crosby quit as an adviser to private equity group Bridgepoint after the report was published and is under pressure to relinquish his seat on the board at caterer Compass. Hornby has a top job at bookmaker Coral and Stevenson continues to hold directorships at the Tate and Glyndebourne. A three-year rule makes it difficult for City regulators to take any action against the trio.

In addition, the Financial Services Authority closed its enforcement investigation last year when Cummings was fined – even though it is yet to publish its own report into the catastrophe.

From welfare to banks, fairness is the key | Observer editorial

Category : Business

The Tory position on social equity, personified by the words of George Osborne, only adds to division

Britain needs an urgent debate about fairness – the responsibilities we all have to the wider society we live in, and to the taxpayer. Last week saw examples of extraordinary duplicity and criminal irresponsibility from both the upper and lower echelons of society.

Britain’s most infamous benefits claimant, Mick Philpott, was jailed for life for the death of six of his 17 children in a fire he started. The case prompted a sometimes unedifying debate about the part played by our welfare system in the appalling events, amid claims that taxpayers had funded the chaotic lifestyles that nurtured tragedy. Meanwhile, a parliamentary inquiry into HBOS and a special report into Barclays commissioned by the bank itself exposed cavalier irresponsibility with others’ savings in the quest for personal gain, with the taxpayer directly or indirectly picking up the pieces once disaster struck.

But instead of national conversations about encouraging fairness and responsibility at both the top and bottom of society, there has been a single-minded focus on the failings of those on the lower rungs of the ladder, often reinforced by an unwillingness to correct widespread misconceptions about the true levels of welfare payments. Philpott has become part of an unpleasant syllogism, shamelessly created by the beleaguered chancellor, George Osborne, in his efforts to portray the coalition’s welfare “reforms” as grounded in morality and fairness.

Philpott, runs the argument, was party to the manslaughter of his children. He was also a benefit claimant who bred children as sources of income provided by an unreformed welfare state. Therefore, both the benefit system and its claimants are as morally corrupt as Philpott and the coalition’s decision to reshape welfare, notably capping claimants’ income at £26,000, is wise and in tune with the people’s instincts.

The best that can be said about Mr Osborne’s position, supported by the prime minister, is that he expresses a very partial truth supported by a moral position on fairness that is selective and discriminatory in its application. The worst is that it is a mendacious stigmatisation of a system that is all that stands between the majority of claimants and destitution. Yet to win this argument, defenders of the very principle of welfare, social security and the social contract that stands behind them have to ensure that what they are defending corresponds to fairness, thus revealing the mendacity and cruelty of Osborne’s position. This they have failed to do, not least because the system has been allowed to drift too far away from fairness principles.

For the Tories strike a popular chord when they say they want an end to the something-for-nothing society and that welfare as it is currently organised rewards Philpott-style irresponsibility. One of the principles of fairness is that there should be a proportional relationship between what one contributes and what one gets back. This is an elemental human instinct, which Osborne invokes, and which the current welfare system insufficiently respects. William Beveridge, the architect of the welfare state, wanted to defend it from Osborne-type attacks by insisting it be based on the contribution principle. It would genuinely be a collective insurance system, with insurance premiums leading to proportional benefits – one’s pension, unemployment and sickness benefits.

But successive governments have failed to earmark national insurance contributions for a dedicated fund that will pay out to beneficiaries on the basis of how much they have paid in. Instead, contributions have been treated as if they are income tax payments. This means that all benefits are funded out of general revenues at the discretion of the government of the day. How welfare is paid for has become a technical matter.

Indeed, Mr Osborne has investigated whether there is a case for merging tax and national insurance. But benefits that are part of a social insurance system that represents a social contract are not the same as benefits paid for from general taxation. The charge against the Conservatives is that they have no interest in expressing fairness as part of a social contract. Rather, they want a minimal system that addresses only acute need that they judge to be deserving, funded by taxation and at the discretion of politicians and officials.

This lack of concern with fairness extends to how we address the role of luck in our lives. If someone has an accident, people understand that it is fair to lend a helping hand. Philpott’s children did nothing to deserve the fate of having him as their father. Indeed, no child has done anything to deserve living in a disadvantaged family. This is why society tries to relieve their circumstances by giving their parents the cash to feed, clothe and house them and why it tries to ensure they are properly parented and educated.

This is a cardinal fairness principle. The policy of capping total payments to families, and reducing their housing benefit if they are alleged to have too much space in their homes, in effect penalises children for the bad luck of being born to the wrong parents. Yes, Philpott abused the system, but we should not distort the life chances of hundreds of thousands of other disadvantaged children for one case.

Fairness principles are indivisible: the same must apply at the top of our society as it does at the bottom. HBOS was an insolvent bank and, as the parliamentary report makes clear, was managed disgracefully in the run-up to its collapse and takeover by Lloyds Bank, which in turn only survived because of a huge capital injection by the taxpayer. It is crystal clear that in the years before 2008, banks in general, and HBOS and RBS in particular, ran themselves with too little capital in order to maximise profits and bonuses. They were bailed out by the state providing both capital and more than £1tn of extra liquidity. How bankers are paid and how they run their banks have as profound an impact on society – and taxpayers – as the welfare system.

Yet Mr Osborne, the self-appointed champion of fairness, has fought tooth and nail against the European parliament’s proposal to limit bankers’ bonuses to twice their salaries. The proposal to ringfence commercial and investment banking, and raise banks’ capital, will only be implemented in 2019, while public services are taking significant cuts now. The executives at the helm of HBOS whose actions cost billions of pounds directly – and indirectly contributed to our five-year recession – have suffered little more than reproach and personal embarrassment. More widely, 300,000 individuals with incomes over £150,000 are to enjoy a reduction in income tax from this weekend.

This is not a moment for a witch-hunt over welfare abusers. Rather, we need a proper argument about whether British society as a whole is fair. It is not one that Mr Osborne, or his policies, would win.

Confused about Bitcoin? It’s ‘the Harlem Shake of currency’ | Heidi Moore

Category : Business

Despite the hype, Bitcoin is used by very few people. It is not a legitimate currency just because it had a bubble

An obscure digital currency – used mostly for running drugs and laundering money for dictators – suffered a sudden crash on Wednesday, causing a minor sensation mostly among financial journalists and pundits.

Bitcoin is a currency created years ago by an obscure hacker in the spirit of subversion, to trade goods while dodging the gimlet eye of financial regulators. While theoretically it can be used for respectable online purchases, it is too complicated to buy and maintain for people who aren’t online 18 hours a day, so it is used primarily to fuel a shadow economy of vice. It has boomed in value. You can barely throw a rock without finding some pundit opining on how “Bitcoin is the new gold” or how Bitcoin will undercut the modern financial system. Maybe someday, but no time soon.

Bitcoin doesn’t work like other currencies. For one thing, it’s less like a currency, which are theoretically infinite in number, and more like a commodity, which are limited. No one will print more Bitcoins, for instance. There are currently 10.8m and they’ll cap out in 2140. A network of tech-savvy programmers – okay, call them hackers – work on secret algorithms to create and release Bitcoins at their own discretion. Bitcoins are anonymously bought and traded. They have no regulator and no accountability. They’re designed to be the favored by people who want to do things on the internet without getting caught.

They’re also not easy to obtain. In a piece for the Guardian last month, Arwa Mahdawi explained how bitcoins work:

“If you want to buy Bitcoins you simply go to an online exchange service such as Bitinstant and convert your local currency into the virtual money. These are then stored in a ‘wallet,’ which functions as a sort of online bank account. You can then go and spend these anywhere that takes Bitcoins to buy anything from socks to drugs.”

This doesn’t sound very special, and it isn’t, except that Bitcoin had the fortune to create a mini-crisis. Bitwallet, the online bank account service for bitcoins, was hacked today. Even though this seemed to spur a crash in bitcoins – they went from a high of $147 to a low of $108 today – this hacking may prove to be a benefit. A crash has done untold benefit to ramp up Bitcoin’s reputation. A crash means that Bitcoin has finally arrived. Now it is just like respectable currencies.

For a financial punditocracy starved by years without a proper bubble to bemoan, Bitcoin’s timing was impeccable if the goal was to look important. A month ago, Bitcoin was worth a modest $32 a share. When Cyprus started suffering its financial crisis, the ample riches sitting in the country for money-laundering purposes found their way to Bitcoin, according to a theory by ConvergEx strategist Nicholas Colas.

There are still only around $800m of Bitcoins in circulation, a tiny amount in a world economy that moves in trillions, and nothing like any serious currency. It is Bitcoin’s sudden, enormous increase in value makes it worthy of attention. Bitcoin is a bubble. It can ask for no better advertisement to be taken seriously. Paradoxically, the path to legitimacy is paved by hype.

There is ample commentary to this effect. Alan Safahi, the CEO of a cash payment processor that deals with Bitcoins, lamented that the currency is in a “bubble”. Art Cashin, a grizzled veteran of the New York Stock Exchange trading floor, just compared Bitcoin to the infamous Dutch tulip bubble, one of the standard comparisons for any serious modern financial crisis. From tech stocks to mortgage-backed securities, the tulip-bubble comparison is the language of financial crisis.

Bitcoin, known to very few people, used by very few people, is now in heady company, taking its place alongside other once-afflicted currencies like the Russian ruble or the Argentinian peso. Bitcoin, while it was functioning quietly, was boring. Now that it’s crashing, it has taken on an air of tragic glamor.

Is it only matter of time before we find out about sub-prime Bitcoin lending or Bitcoin consumer abuses? Features will abound on poverty and Bitcoin, how Bitcoin oppresses inner-city development, and how Bitcoin will raise food prices. Senate investigations into Bitcoin will follow. Hacker heads will surely roll.

Of course, in a rational world, none of that will be written, except perhaps as satire. Bitcoin’s crash is less of a currency crisis than an opportune moment for internet wisecracks. Kevin Roose, a New York Magazine journalist who says he bought one Bitcoin at $133, jokingly lamented his impending bankruptcy.

Nothing like a Bitcoin crash to teach you who your real friends are.

— Kevin Roose (@kevinroose) April 3, 2013

The best comment of the day was also the one that put Bitcoin in its proper place: as an internet meme. “Bitcoin,” opined journalist Micheline Maynard today, “is the Harlem Shake of currency.”